The Ultimate Ponzi Scheme

The financial community has had it’s share of scandal over the past years.  Certrainly Bernie Madoff has made the most headlines however Fort Lauderdale Ponzi schemer Scott Rothstein may not have grabbed as many headlines but managed to nearly as much damage to his investors. The Ultimate Ponzi: The Scott Rothstein Story was penned over two years by public relations executive Chuck Malkus, a former reporter at the Homestead daily South Dade News Leader.   Malkus said he became fascinated with the story from the day in December 2009 when heavily-armed FBI agents raided the posh offices of Rothstein’s law firm.

chuck_malkus“It was great street theater,” Malkus  recalls. “There were SWAT teams and machine guns.  “I represent many law firms, and they used to tell me they couldn’t figure out how Scott was so rich when you never saw him or his lawyers arguing cases in court.  “They told me there was no way that the business model of a law firm justified the kind of income that Scott had. Rothstein soon became one of the most notorious and corrupt attorneys in the country. He stole $300,000 from a drug-addicted client nearly a decade before the lawyer’s $1.2 billion Ponzi scheme collapsed.”

Malkus was suspicious of Rothstein from the start despite the lawyer’s largesse. “It just didn’t seem right that this guy is an overnight philanthropist,” he said. “He was spending lots of money, but he wasn’t spending any of his time in the boardroom.”   Several law firms also suspected Rothstein’s money was not coming from legal work.” In my investigation, there was one firm who had a partners’ meeting, and it was simply asked if there was anybody in the room that was on the other side of an RRA case, and there wasn’t anyone in the room that had a case against RRA,” Malkus said. The 70-attorney, 150-employee firm also seemed to be absent from courthouses, Malkus said. Rothstein even ratted out his favorite escort service to curry favors from federal authorities, ultimately causing the nation’s largest provider of call girls to shut down!

The book examines Rothstein’s deposition with civil attorneys and blames him for the theft of $300,000 from a client’s settlement. If true, that would contradict his mitigation letter to U.S. District Judge James I. Cohn, who sentenced Rothstein in 2010. The Fort Lauderdale judge has the power to reduce Rothstein’s sentence for additional cooperation with prosecutors and bankruptcy attorneys trying to recoup money for his victims.
Being caught in a lie wouldn’t help Rothstein’s chances with Cohn. Attorney Mark Booth, a partner at Rogers, Morris & Ziegler in Fort Lauderdale, told Malkus in 2007 that he had a client who fathered an illegitimate child and was looking to gain custody.

ponzibkA major player in the book is Stuart Rosenfeldt, Rothstein’s only equity partner in the firm. Rosenfeldt, under investigation for nearly 3 1/2 years, has not been charged and maintains he knew nothing of the four-year settlement financing despite spending $1 million on luxury goods from designer suits to exotic turtles.  Malkus said he interviewed Rosenfeldt on several occasions. “Many people in South Florida are skeptical of Stuart’s claim that he was kept in the dark about Scott’s illegal and fraudulent deals and knew nothing about the Ponzi scheme,” Malkus writes. “But after spending more than two years of investigating, I believe his assertions are accurate.”

Rosenfeldt maintained he and Rothstein split duties. He would handle the law side and Rothstein the financial.   “Stuart was going to burst so he insisted on sitting down with him. I have not yet read the book so I can’t tell you how it relates to Rothstein’s testimony,” said Rosenfeldt’s attorney, Bruce Lehr, a partner Lehr Fischer & Feldman in Miami. “Sitting down did allow Stuart to express his version.”

But Rothstein’s June deposition indicates the mother is Tammy Parent. A Tammy Parent is listed on a social media site as a Fort Lauderdale and former Hollywood resident, but there is no phone listing for her. Rothstein doesn’t deny when asked that Parent threatened to report him to The Bar for taking her settlement. Nor does he deny giving her “thousands of dollars” because he felt bad for her and demanded receipts to show the money was spent on her children. Rothstein told attorneys to check the email traffic between him and Rosenfeldt.

Marc Nurik, Rothstein’s criminal defense attorney, said he was unaware of Parent or any accusation that RRA was started with stolen seed money. He said he had no comment on Malkus’ book because he has not read it.

“The only thing I can say that he wrote the book so early in the Rothstein saga, it would be like reporting on an NFL football game at the end of the first quarter,” Nurik said.

RRA was founded in 2002 after Rothstein was fired from Philips Eisinger Koss & Rosenfeldt for ethical lapses. Lead partner Gary D. Philips told Malkus that a client phoned to discuss a complaint Rothstein was handling but, when Philips went to look for the file, he found it didn’t exist. “He told the client he had already filed the motions,” Philips told Malkus.

Rosenfeldt said Rothstein won him over with charisma, but he wishes he stuck with his instincts when he first met him at a law conference in Fort Lauderdale.
“I didn’t like him. He had an arrogant side,” Rosenfeldt told Malkus. “Cocky I think is the best word. Just better than anyone else. I wish I had stayed with my instincts.”